Financial Glossary
Finding Equity (Owner's Equity)
Equity, often called owner's equity or shareholders' equity, is found by subtracting total liabilities from total assets. It represents the residual value owners hold in the business after all debts are settled. This figure sits on the balance sheet and ties together the fundamental accounting equation: assets equal liabilities plus equity.
Problem & Application
Knowing your equity tells you what the business is actually worth to you, not just what it brings in. A real estate investor or campground owner can have strong revenue but thin equity if the property is heavily mortgaged, which matters for refinancing, partner buyouts, and exit planning. Tracking equity over time also shows whether you are building wealth or simply servicing debt.
In Short
Finding equity reveals the real ownership value behind the revenue and the debt. It is the figure that ultimately measures whether your business is growing your net worth.